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Keystone Rejection Tests Trudeau’s Balancing Act on Climate and Energy

OTTAWA — One of President Biden’s first acts upon taking office was to cancel the permit for the Keystone XL pipeline, the long-debated project to transport crude from Canada’s oil sands to the United States.

But Prime Minister Justin Trudeau and elected officials in Alberta, the Canadian province where the pipeline originates, are not giving up so fast.

The nearly 1,200-mile Keystone XL was intended to carry crude oil from Canada to Nebraska, where it would connect with an existing network to deliver the crude to refineries on the Gulf of Mexico.

In canceling the pipeline, Mr. Biden took some of his first steps toward reversing the legacy of the Trump administration, which revived the project after it was rejected by President Barack Obama in 2015.

Mr. Trudeau has long supported the pipeline as part of his effort to balance his priority to fight climate change with supporting Canada’s energy industry in Alberta and in other western provinces.

Even before Mr. Biden’s announcement, the premier of Alberta sent out a statement saying he was going to object to it, and vowing legal action.

“This is about more than just Keystone XL,” said the premier, Jason Kenney, an often fierce Conservative critic of Mr. Trudeau’s Liberal government. “This is about the Canada-U.S. relationship, this is about tens of thousands of jobs here, this is about billions of dollars of revenue for governments to pay for things like health care.”

Canada exports about 80 percent of its oil to the United States, most of it coming from the oil sands, which, along with the energy industry, are critical to Alberta’s economy. Even during the current oil price slump, the sector provides about 140,000 jobs and, before the collapse of oil prices, royalties from the oil and gas industry made up about 20 percent of Alberta’s budget.

The oil industry had pushed for development of the pipeline in hopes that a direct route to the Gulf of Mexico, where refineries are equipped to process the heavy, low-grade oil from the oil sands in Canada’s interior, would eliminate shipping bottlenecks and lower prices, said Andrew Leach, an energy and environmental economist at the University of Alberta in Edmonton.

But the pipeline project was heavily opposed by environmentalists, American farmers and ranchers, as well as Indigenous groups in the United States who feared it would alter and possibly harm their lands.

“President Biden’s decision to reject Keystone XL on his first day signaled a new era,” said Anthony Swift, the director of the Canada Project at the Washington-based Natural Resources Defense Council, an environmental group long critical of the oil sands.

“New fossil fuel development projects are going to be placed under some sort of a climate test that assesses whether these projects are consistent with our international climate goals,” Mr. Swift added.

American environmentalists also targeted the pipeline as part of their effort to shut down the oil sands, which they say is a particularly dirty energy source. But even with the demise of Keystone, that effort seems thwarted.

There are numerous pipelines between the two countries, in addition to railways, through which Canada sends oil to American refineries. And two other Canadian pipelines serving the United States are currently being expanded, making it likely that production in the oil sands will continue.

Still, the question, Mr. Leach said, is whether these other pipelines are also targets of the new U.S. administration: Is Mr. Biden “saying basically we don’t want cross-border pipelines, or we just don’t want this particular pipeline?”

One of the pipelines currently being expanded is in the Midwestern United States. Another links the oil sands to a port in British Columbia that can serve refineries on the United States’ Pacific Coast by ship and which also has a spur line to Washington State. Both have been targeted by protests.

There is another pipeline — running from Western Canada through the Midwestern United States — whose permit Michigan has proposed revoking for environmental reasons, a move that could choke off much of the pipeline’s route.

Mr. Biden’s announcement to cancel the Keystone XL fulfilled a promise he had repeatedly made on the campaign trail as part of his climate-change agenda, though the president has not announced any future plans for the other pipelines shared by Canada and the United States.

In a statement issued Wednesday before Mr. Biden took the action, TC Energy, the company that owns Keystone, said that it was disappointed by Mr. Biden’s choice and that it would suspend work on the pipeline while it considered its options.

The cancellation will “lead to the layoff of thousands of union workers and negatively impact groundbreaking industry commitments to use new renewable energy as well as historic equity partnerships with Indigenous communities,” the company said.

Chris Bloomer, president and chief executive of the Canadian Energy Pipeline Association, said that the demise of Keystone XL had more to do with opposition to the oil sands than the project itself.

“It seems that no matter what the industry does, there’s no basis for a middle ground or compromise,” he said from Calgary. “The appetite among environmentalists to shut things down is insatiable.”

The likelihood of Mr. Kenney or TC Energy prevailing against Mr. Biden through litigation is slim, said Kristen van de Biezenbos, a law professor at the University of Calgary in Alberta.

Challenges in American courts or through investor provisions of trade agreements could take years to resolve, would likely fail and, ultimately, wouldn’t restore the presidential permit needed for the pipeline, she said.

And a Canadian victory in court wouldn’t eliminate the Keystone project’s other hurdles — legal challenges from environmental groups, regulatory roadblocks within states and the unfavorable economic climate that have scared off investors and stalled construction.

“I really wonder about the wisdom of continuing to pursue this,” she said. “It would be faster to build a pipeline in Canada.”

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